Presented Below Are The Components In Gates Company's Income
Presented Below Are The Components In Gates Companys Income Statement
Presented below are the components in Gates Company’s income statement. Determine the missing amounts. Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses Net Income (a) $75,000 $ [removed] $30,000 $ [removed] $10,800 (b) $108,000 $70,000 $ [removed] $ [removed] $29,500 (c) $ [removed] $83,900 $79,600 $39,500 $ [removed]
Paper For Above instruction
The task involves analyzing and completing the missing components in Gates Company's income statements based on the provided financial data. The income statement is a crucial financial report that summarizes a company's revenues, expenses, and profits over a specific period. It typically includes sales revenue, cost of goods sold (COGS), gross profit, operating expenses, and net income. By understanding the relationships among these components, it is possible to determine the missing figures in the company's financial statements.
Income Statement Components and Relationships
The primary formula that underpins income statement calculations is:
Gross Profit = Sales Revenue - Cost of Goods Sold
Similarly, the net income can be derived using:
Net Income = Gross Profit - Operating Expenses
Understanding this relationship is essential because it allows us to find missing amounts given some known figures.
Analysis of Component (a)
Given:
- Sales Revenue = $75,000
- Gross Profit = $30,000
- Operating Expenses = Unknown
- Net Income = $10,800
- COGS is missing.
Step 1: Find COGS
Using the gross profit formula:
Gross Profit = Sales Revenue - COGS
Rearranged:
COGS = Sales Revenue - Gross Profit = $75,000 - $30,000 = $45,000
Step 2: Find Operating Expenses
Using the net income formula:
Net Income = Gross Profit - Operating Expenses
Rearranged:
Operating Expenses = Gross Profit - Net Income = $30,000 - $10,800 = $19,200
Summary for (a):
- Cost of Goods Sold = $45,000
- Operating Expenses = $19,200
Analysis of Component (b)
Given:
- Sales Revenue = $108,000
- Cost of Goods Sold = $70,000
- Gross Profit = Unknown
- Operating Expenses = Unknown
- Net Income = $29,500
Step 1: Calculate Gross Profit
Gross Profit = Sales Revenue - COGS = $108,000 - $70,000 = $38,000
Step 2: Find Operating Expenses
Using the net income formula:
Net Income = Gross Profit - Operating Expenses
Rearranged:
Operating Expenses = Gross Profit - Net Income = $38,000 - $29,500 = $8,500
Summary for (b):
- Gross Profit = $38,000
- Operating Expenses = $8,500
Analysis of Component (c)
Given:
- Sales Revenue = Unknown
- COGS = $83,900
- Gross Profit = $79,600
- Operating Expenses = $39,500
- Net Income = Unknown
Step 1: Calculate Sales Revenue
Using the gross profit formula:
Gross Profit = Sales Revenue - COGS
Rearranged:
Sales Revenue = Gross Profit + COGS = $79,600 + $83,900 = $163,500
Step 2: Calculate Net Income
Using net income formula:
Net Income = Gross Profit - Operating Expenses
= $79,600 - $39,500 = $40,100
Summary for (c):
- Sales Revenue = $163,500
- Net Income = $40,100
Conclusion
The missing amounts have been deduced using fundamental income statement relationships. Accurate financial analysis relies on understanding these relationships, which allow for the evaluation of a company's profitability and operational efficiency. Each component plays a vital role in assessing financial health, and being able to compute missing figures enhances decision-making and financial planning.
References
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